Mortgage Delinquencies Hit Four Year Low

By Stevie Duffin Updated on 2/13/2013

By Gretchen Wegrich

A report released Tuesday by TransUnion revealed that serious mortgage delinquencies have reached their lowest rate since 2008. The rate at which delinquencies are decreasing continues to improve, from a 5.19 percent decline in delinquencies during the final months of 2011 to a 5.41 percent decline in the last quarter of 2012. However, long term delinquencies, which often take longer to resolve, are preventing a complete return to what is considered normal delinquency levels.

TransUnion, a credit reporting company, noted that the rate of serious delinquencies (‘serious’ is defined as mortgage payments more than 60 days overdue) dropped 14 percent in 2012 compared to 7 percent in 2010 and 5 percent in 2011. Although positive, the gains are small in comparison to the rate at which they rose –50 percent or more –during the housing market bust which took place from 2007-2009.

“The national mortgage delinquency rate experiences its largest yearly decline since the conclusion of the recession, though we still remain far above normal levels,” said Tim Martin, vice president of U.S. Housing in TransUnion’s financial services business unit.

He added, “The elevated delinquency levels that we still are experiencing are a result of older vintage loans –borrowers who haven’t been making their payments for a rather long time –that are still in the system, inflating the overall rate.”

Foreclosure rates may remain elevated for several years, predicted Martin, noting that the foreclosure process in certain states could take more than 1,000 days.

“It’s not clear yet, but recently announced regulatory rules unrelated to mortgage servicing may tend to slow this process down further,” Martin said, referencing the new Consumer Financial Protection Bureau regulations and additional rules mandated by the Dodd Frank Act.

Between the third and fourth quarter of 2012, 37 states and the District of Columbia achieved improved mortgage delinquency rates, as did 81.4 percent of metropolitan statistical areas. Arizona (-30.93 percent), California (-29.55 percent), and Utah (-20.89 percent) experienced the greatest declines in delinquent mortgages.

Between 2011 and 2012, all but three states decreased their rates of mortgage delinquency. Main (+4.26 percent), Arkansas (+3.02 percent) and North Dakota (+2.00 percent) experienced increased mortgage delinquencies.

The states with the highest rates of delinquencies are Florida (12.47 percent), Nevada (10.45 percent) and New Jersey (7.72 percent).

In the final quarter of 2012, the average mortgage debt carried by U.S. homeowners was $186,785. A year earlier, this figure was elevated at $188,194. The states carrying the highest mortgage debt are District of Columbia, California and Hawaii.